The views and opinions expressed in this article are those of the author (credit expert John Ulzheimer) and not necessarily those of VantageScore.

Your credit scores have become an important component in the underwriting and risk assessment processes of your current and future lenders. To the extent you can earn and maintain solid credit scores you will likely benefit from low-cost extensions of credit with competitive terms on almost all forms of credit. To that end, it’s important to understand that while your credit scores are not based on simply one item in your credit reports, even small updates can lead to major score changes.

Normal Score Movement

Your credit scores are not a permanent component of your credit reports. They are, instead, an additional tool that can be delivered along with your credit reports by the three major credit reporting companies, Experian, Equifax and Trans Union. Because they are not a permanent component of your credit reports, your scores are only calculated when and if a lender or some other party requests your score. As such, your scores are constantly moving up and down like the temperature reading of a thermometer, as items on your credit reports are updated, added, or removed.

If you were to check your own credit scores once a month, which you can do for free from a variety of reputable sources, it’s doubtful they would always remain the same three-digit number. Your scores will move up and down, organically, as your credit reports change. This is called score migration, and it is entirely normal.

Think of all of the changes your credit reports go through every month. Balances change on loans and credit card accounts. New inquiries may be added because you’ve applied for credit, while others may have aged to the point that they are no longer considered by scoring models. A newly opened account may have been added to your credit reports. And, everything also became one month older.

While all of the aforementioned changes can certainly lead to a different credit score from the prior month, it’s unlikely the change will be major. Point being, if you had a solid credit score last month, you’re likely to have a solid credit score this month. That being said, there are some credit report changes that can yield more considerable changes in your scores.

Newly Added Derogatory Information

The presence or lack of derogatory information, also known as “payment history”, is highly influential to your credit scores, regardless of the score brand or type. Generally, derogatory information is going to include late payments, defaults, collection accounts, bankruptcy, foreclosures, repossessions, settlements, and anything else that indicates mismanagement of a credit account. To the extent you can avoid having any of these items appear on your credit reports, your scores will thank you.

However, if one of these items suddenly appears on an otherwise pristine credit report, you should expect your credit scores to likely go down considerably. The flip side is also true. If you have a derogatory entry removed, thus yielding a pristine credit report, you should expect your credit scores to increase considerably.

A Large Increase in Credit Card Usage

How you manage your debt is also highly influential to your credit scores. Generally, the lower the amounts of credit card debt and the fewer the accounts with balances that appear on your credit reports, the more points you’re going to earn from the debt-related metrics. Regarding these debt metrics, it’s important to keep in mind that what’s important is what appears on your credit reports, which is normally your balances from your prior month’s statements. So even if you pay your credit card balances in full each month, your credit reports may not reflect zero balances.

Ideally the target amount of credit card debt is less than 30% of your credit limits. In other words, if you can maintain low balances relative to your credit limits and limit the number of cards with a balance, you’ll do well in the debt category.

If you take on an unusually large amount of credit card debt or you increase the number of accounts with balances, or do both, then your score may go down. The amount of the score reduction is going to depend on just how highly utilized are your credit cards compared to the prior month. And again, the flip side is true here. If you had large amounts of credit card debt that were too close to your credit limits or had a large number of credit cards with balances and you were able to pay them all off, or otherwise reduce your balances considerably, you may see improvement in your credit scores.

A Newly “Younger” Credit Report

While it’s certainly reasonable to focus on the payment history and debt categories because of their importance, another category of credit score metrics that cannot be overlooked has to do with the age of your credit report information. The “age of credit history” category is also influential to your credit scores. And, to give you an idea of its relative importance, it’s more influential than “inquiries” and the influence of inquiries always garners a considerable amount of attention.

Generally, the older your credit accounts, the more points you will earn from this category. There are several metrics that are important, which are the average age of your accounts and the age of your oldest and youngest single accounts as appearing on your credit reports.

If you have a limited number of accounts on your credit report and you open a new credit card or loan, the addition of that newly opened account can cause a meaningful reduction in the average age of your accounts. This reduction can yield a lower score. And, if for some reason the oldest account on your credit reports is removed, that too can cause a reduction in credit scores. This type of score impact is harder to diagnose because consumers generally focus on the payment history and debt that appears on their credit reports, and rightly so.

NOTE: Please do not conflate “age of credit” with “age of consumer”, as they don’t have anything to do with each other. Your age or date of birth is not considered by credit scoring models.

What Can You Do?

One of the best ways to stay on top of your credit scores is to ensure that your credit reports are accurate and void of any negative information. You can access your credit reports for free as often as once per week through at least April 2022. You can read the recent announcement by the Consumer Data Industry Association and the three credit reporting companies regarding how you can get free weekly credit reports.

You can also stay on top of movement in your credit scores by taking advantage of the many “free score” options available from lenders and various websites. You can find a list of free credit score providers, here.